WARNING LIGHTS FLASH ON SCOTLAND’S JOB DATA

BILL JAMIESON says few features have provided more optimism about Scotland’s economy than the run of upbeat figures on employment. Now comes a fresh survey from the Bank of Scotland this week pointing to further growth in permanent employment.

It’s been welcomed by Finance Secretary John Swinney who lost no time in hailing the figures as good news.

But is it all as good as it seems?

Two trends stand out in the bank’s latest survey: a sharp drop in available candidates for advertised posts – and a steep increase in permanent starting salaries.

Now a rise in pay levels has been long awaited and will be well received by employees. Salary rises – where there have been rises at all – have been subdued since the 2008-09 global financial crisis and recession.

But its coincidence with a continuing shortage in job applicants – a trend that has featured in the bank’s monthly report for more than 18 months – points to problems ahead.

The bank’s survey shows continued – albeit slower – growth in demand for staff, “but a sharp contraction in the availability of candidates to fill vacancies.

In fact the availability of permanent candidates shows the fastest drop since January. And temporary staff pay grew at its fastest rate for 14 months. On both fronts, the decline in availability was sharper than at the UK level.

Recruiters operating in Scotland also reported that demand for staff continued to rise, in particular in IT and computing.

Now “skills shortages” have been a central concern of our labour market data for years. And while Scotland has not been alone with this problem, it now appears to be making an impact on pay rates for those sufficiently qualified for the vacancies on offer.

While the rise in employment overall can be seen as a sign of recovery in the economy from the slowdown evident earlier this year, that sanguine view is clouded by a concern that the figures are a product of a limited and constrained pool of skilled labour.

Put another way, it can be seen less as a sign of good health but the result of a marked and intensifying skills shortage. Not so good.

Of course, the coincidence of applicant shortage and sharp rises in starting salaries can be seen as the market doing its job. Higher starting pay rates should in due course bring forward more applicants. A functioning free market provides the solution.

But that would be to reckon without cultural and structural impediments affecting the supply of suitable labour.

For years employers have complained about poor standards of literacy and numeracy among school leavers applying for positions. And latest results from education surveys show the problem is persisting.

At the same time the persistent shortage of applicants for advertised posts may also reflect a reluctance among qualified people to apply for jobs in Scotland.

One of the main reasons for the expansion of higher education in Scotland – and in particular students from overseas – was to expand our base of skilled workers for the knowledge economy.

We may have succeeded in creating and expanding world class universities. But if the figures testify to a reluctance among graduates to find work in Scotland and settle here, that’s a problem we need to address.

This week’s survey from the bank follows hard on the heels of a report from recruitment consultancy Manpower that Scotland is lagging behind the rest of the UK at job creation.

Its quarterly employment outlook survey, which tracks confidence in the jobs market, shows a general improvement since the last count.

But the poll of 2,100 UK employers found that the same number of Scottish companies intended to contract their workforce as expand it.

The Scottish government said the survey did not reflect “official figures” and that Scotland was “leading the way in the jobs market”.

But according to Manpower, all other parts of the UK reported more hiring than shedding of staff. Amanda White, operations manager at Manpower UK, said she expected current trends to continue.

She added: “With skills shortages in the oil and gas industry well-known, it’s important that employers track the skills required, in order to ensure growth for the long-term.

“Among the gloom, there are some bright spots, such as the thriving customer service industry in Scotland, with Glasgow and Edinburgh both seeing demand for candidates with call centre experience.

A Scottish government spokesman challenged the findings, arguing that last year saw the fastest annual rate of growth since before the financial crisis.

For an administration keen to point out differences between Scottish and UK experience, the response doesn’t address the issue of differential rates of growth in job creation. And our labour market surveys may be pointing to a longer term problem…